More retirement plan participant data, please

Advisers seek detailed client info to compete more effectively

Jun 2, 2018 @ 6:00 am

By Evan Cooper

To many advisers serving individual investors, the sizable AUM figures of advisers specializing in defined contribution plans are tantalizing.

But although the assets under their management may be substantial, retirement-plan specialists sometimes feel as if the owners of those assets, the plan participants themselves, are in a sense shadow versions of typical advisory clients. As indirect clients, participants exist as part of a group, with plan advisers knowing little about who they are individually or what they own. Detailed participant information is held by plan record keepers — insurers, fund giants and others — who keep track of plan inflows, outflows and investments, as well as other important personal data.

Because record keepers, not plan advisers, actually "know" who the plan participants are and what they own, it is that key plan and participant data that plan advisers currently are seeking. In today's more competitive and margin-compressed world, plan advisers say they need participant data to more effectively serve defined contribution plans and those in them, as well as to compete more effectively to manage the assets of participants when they retire or otherwise leave the plan.

"We've got to figure out how to get the data because our biggest growth opportunity are the thousands of participants in our plans," said Vincent Morris, president of the financial services division of Bukaty Cos.

Locked at record keepers

What's keeping the participant data largely locked at record keepers is a combination of factors: cumbersome and non-standardized legacy systems that are not easily tweaked to provide data in the form advisers may request, concerns over cybersecurity, and competitive and revenue issues amid a rapidly consolidating record-keeping business in which margins are under pressure.

"Many record keepers essentially are saying to advisers, 'I have the data and you want it, so pay me for it,'" said Fred Barstein, executive director of The Retirement Advisor University and a discussion moderator at the recent InvestmentNews Retirement Plan Advice Think Tank in New York.

But even if advisers were standing in line with checks, extracting desired participant data from record keepers would not be easy.

"We were working in a project about four years ago in which we asked six record keepers for a kind of omnibus trading arrangement so that we could trade for all the plans they held," said Fielding Miller, chief executive at large RIA aggregator Captrust Financial Advisors. "They all agreed to do it, and we gave them a format, and we built a reporting mechanism to feed the data into our templates, but it was a mess. We struggled with it for four years and finally gave up," he said.

Part of the difficulty in extracting data from record keepers is that the integrity of that data may be less than optimal, and record keepers don't have easy access to it themselves, Mr. Barstein said.

Also sympathetic to record keepers is Jamie Greenleaf, lead adviser and principal of Cafaro Greenleaf.

"The problems we have aren't the record keepers' fault. They're working with antiquated systems, and they don't have the bandwidth from a people or monetary standpoint to upgrade their systems," she said. "They're not trying to withhold it; they just can't supply it."

Standardization problems

Even if they could, the data product probably would not be particularly helpful because of a lack of standardization.

"Record keepers all have different ways of calculating and categorizing things," Mr. Miller said. "They have their own languages and can't even agree on asset classes."

Companies including Envestnet and the not-for-profit industry utility Depository Trust & Clearing Corp. are working on standardization solutions for plan data, but releasing any kind of readily usable data would be hindered by concerns about cybersecurity. With information about plan participants that includes Social Security numbers as well as contact information, record keepers would be loath to put such sensitive data at risk of being hacked or compromised in any way.

"Getting participant-level data is just never going to happen because the record keepers don't have the individual participant signing off to say that it's OK to share that information," said Jeffrey Cullen, a managing partner at Strategic Retirement Partners.

Perhaps the key reason advisers and record keepers agree about the importance of client data — and argue over access to it — is that both sides see innovative participant solutions as the future of the business.

"The data in our industry is in a lot of different pockets," said William Harmon, president of retirement corporate markets at Voya Financial, a major record keeper. "The issue we face is how to consolidate the data, personify it and deliver it in a meaningful, actionable way."

Evan Cooper is a freelance writer.

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